Three trends have defined the past decade in the asset management industry*: large firms have grown even larger—with the top 20% managing 45.5% of total AUMs in 2023, up from 41% in 2013. Passive management is here to stay, representing 33.7% of assets under management compared to 14.3% in 2013. Finally, alternative assets, also known as private markets, now account for 10% of global AUMs.
Here are three additional data points for context: between 2013 and 2023, passive management AUMs grew at a compound annual growth rate (CAGR) of 14.7%, while alternative asset AUMs grew at 14%. Meanwhile, total AUMs grew by just 5.3% annually.
In 2009, BlackRock became the largest asset manager by AUM and has maintained that position for the past 14 years. The firm has adapted to industry changes, prioritizing passive management with iShares since acquiring the company in 2009 and launching alternative investments for the wealth segment in 2011. This commitment has only deepened in recent years.
What’s next? What is BlackRock doing to maintain its leadership? In an interview with Aitor Jauregui, BlackRock’s Head of Latin America, conducted from the firm’s Miami offices, we discuss the changing landscape of asset management, focusing specifically on how these shifts are impacting wealth management professionals in the markets he oversees: US Offshore and Latin America.
Changes in the Wealth Segment: The Shift to Fee-Based Models and the Rise of Model Portfolios
Aitor Jauregui highlights two key changes in the segment. The first is the rise of the fee-based model (where clients pay for advice rather than transactions) and the growing role of technology, which, he says, “go hand in hand.”
He backs this up with data: “In the US domestic market, the fee-based model accounts for 53% of managed assets; in Europe, it’s 42%. In Latin America, it’s just 20%, but this breaks down to 35% for US Offshore and only about 12% for Latin America.” For Jauregui, what’s important is that “in a business growing at double digits, the fee-based segment is also growing at double digits. In US Offshore, the fee-based market has grown from 20% to its current 35%, and much of this shift from brokerage to fee-based is explained by the growing role of model portfolios.”
Model Portfolios and Technology: A Symbiotic Relationship
The growth of model portfolios has been driven by technology over the past two years. BlackRock has positioned itself as a leading provider of these portfolios for RIAs and fintechs in the offshore and Latin American markets, outpacing competitors.
“In 2024, 25% of BlackRock’s ETF flows in the offshore market came from model portfolios. In 2021, a year of strong ETF growth, only 3% came from model portfolios. This speaks volumes about the increasing adoption of model portfolios in this market,” Jauregui explains.
While BlackRock’s initial success in model portfolios was primarily supported by its iShares ETFs, the firm is now working to incorporate technological solutions that include alternative assets. “Through our partnership with Partners Group, we are developing solutions—currently only available in the US domestic market—that allow model portfolios to combine public and private assets, including BlackRock products,” Jauregui notes. While these solutions aren’t yet available offshore, their existence underscores the feasibility of integrating private assets into model portfolios, provided infrastructure challenges—like automating rebalancing for semi-liquid private assets—are addressed. “Evergreen solutions are increasingly common among private credit funds, which is the type of alternative asset we see the most demand for from our wealth clients.”
BlackRock Embraces the Rise of Active ETFs
A direct result of technology’s growing role is the ability to segment wealth clients and serve individuals with much smaller investable assets. Advisors in the ‘mass affluent’ segment, catering to non-US residents with investable assets between $500,000 and $3 million, can now efficiently serve clients primarily through model portfolios.
“In this segment, we are witnessing the rise of active ETFs. These products offer the benefits of active management with specific tracking error objectives, packaged in an ETF that provides transparency, liquidity, and cost efficiency.”
Currently, iShares offers eight active ETFs in UCITS format, all launched last year. “By 2025, we plan to continue providing solutions to our clients through active ETF vehicles, including systematic strategies in ETF format. We also anticipate greater innovation in iBonds, defined-maturity bond ETFs,” Jauregui concludes regarding future launches.
Private Markets: Inorganic Growth for Long-Term Goals
The past year has been eventful for BlackRock’s alternative asset unit. In January, the firm announced the acquisition of GIP, integrated on October 1, to expand in the infrastructure segment—a sector that globally requires significant investment beyond what governments can finance, opening the door to private investors. “Infrastructure includes not just ports, airports, and roads but also everything related to digitalization and artificial intelligence,” Jauregui points out.
One concrete initiative is the GAIIP partnership between BlackRock, GIP, Microsoft, and MGX—an Emirati sovereign technology fund—to invest up to $100 billion in infrastructure supporting data centers and their associated alternative energy sources, driven by the growing demand for AI.
In 2024, BlackRock also announced the acquisition of Preqin, a market intelligence leader for alternative assets. “We firmly believe in the need to continue investing in data analytics to bring greater transparency to private markets,” says Jauregui. He explains that Preqin, along with eFront (acquired in 2019), complements Aladdin, BlackRock’s public markets risk management software, by providing a private markets risk management solution.
The firm’s latest acquisition in alternatives is the private credit platform HPS Investment Partners, announced in December. Closely tied to the need for new energy and infrastructure is the need for new financing sources for the future. “Direct lending strategies will become increasingly important; both our institutional and wealth clients express significant appetite for opportunities in infrastructure and private credit,” Jauregui adds.
*Data from ‘The world’s largest 500 asset managers’ Thinking Ahead Institute and Pensions & Investments joint study | October 2024.
